Q2 2024 PriceSmart Inc Earnings Call
Operator: Good afternoon, everyone, and welcome to PriceSmart Incorporated's earnings release conference call for the second quarter of fiscal year 2024, which ended on February 29, 2024. After remarks from our company's representatives, Robert Price, Interim Chief Executive Officer, and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as time permits. As a reminder, this conference call is limited to one hour and is being recorded today, Wednesday, April 10, 2024. A digital replay will be available following the conclusion of today's conference call through April 17, 2024 by dialing 1-888-660-6264 for domestic callers or 1-646-517-3975 for international callers and by entering the replay access code 59511-POUND. For opening remarks, I'd like to turn the call over to PriceSmart's Chief Financial Officer, Michael McCleary. Please proceed, sir.
Good afternoon, everyone and welcome to price Smartly incorporated earnings release conference call for the second quarter of fiscal year 'twenty 'twenty four which ended on February 29, 2024. After remarks from our company Representatives, Robert price interim Chief Executive Officer, and Michael Mccleary Chief.
Financial officer, who will be given an opportunity to ask questions as time permits as a reminder, this conference call is limited to one hour and is being recorded today Wednesday April 10th 'twenty 'twenty four.
A digital replay will be available following the conclusion of today's conference call through April 17, 2024 by dialing 18886606264 for domestic callers or 16465173 97, five for international callers and by entering into you.
Replay access code 590, 511 pound for.
Michael L. McCleary: For opening remarks, I'd like to turn the call over to to price Smarts, Chief Financial Officer, Michael Mccleary. Please proceed sir.
Michael L. McCleary: Yeah.
Michael L. McCleary: Thank you, Operator, and welcome to PriceSmart Inc.'s earnings call for the second quarter of fiscal year 2024, which ended on February 29, 2024. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday afternoon, April 9, 2024. Also, in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-Q. These documents are available on our investor relations website at investors.pricesmart.com, where you can also sign up for email alerts. As a reminder, all statements made on this conference call, other than statements of historical fact, are forward-looking statements concerning the company's anticipated plans, revenues, and related matters. Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate, and some other expressions.
Michael L. McCleary: Thank you operator, and welcome to the <unk> earnings call for the second quarter of fiscal year 2024, which ended on February 29, 2024, we will be discussing the information that we provided in our earnings press release, and our 10-Q, which were both released yesterday afternoon April nine 2024.
Michael L. McCleary: Also in these remarks, we refer to non-GAAP financial measures you can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release, and our 10-Q. These.
Michael L. McCleary: These documents are available on our Investor Relations website at investors got price Mart Dot Com, where you can also sign up pretty no alerts.
As a reminder, all statements made on this conference call other than statements of historical fact are forward looking statements concerning the companys anticipated plans revenues and related matters forward. Looking statements include but are not limited to statements containing the words expect believe plan will may should estimate and some.
Michael L. McCleary: Other expressions.
Michael L. McCleary: All forward-looking statements are based on current expectations and assumptions as of today, April 10, 2024. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's most recent annual report on Form 10-K, the quarterly report on Form 10-Q filed yesterday, and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time.
Michael L. McCleary: All forward looking statements are based on current expectations and assumptions as of today April 10th 2024.
Michael L. McCleary: These statements are subject to risks and uncertainties that could cause actual results to differ materially including the risks detailed in the company's most recent annual report on Form 10-K quarterly reports on Form 10-Q filed yesterday and other filings with the SEC, which are accessible on the Sec's website at Www SEC Gov.
Michael L. McCleary: These risks may be updated from time to time.
Michael L. McCleary: The company undertakes no obligation to update forward-looking statements made during this call. Now, I will turn the call over to Robert Price, PriceSmart's Interim Chief Executive Officer. Thank you, Michael.
Michael L. McCleary: Company undertakes no obligation to update forward looking statements made during this call.
Michael L. McCleary: Now I will turn the call over to Robert price <unk> interim Chief Executive Officer.
Robert E. Price: Thank you Michael.
Robert E. Price: I want to extend my appreciation to everyone at PriceSmart for contributing so much to a very successful second quarter. I especially want to acknowledge a few of our warehouse club managers. These locations were challenged operationally because of the very high sales volumes during December.
I want to extend my appreciation to everyone at price Mart.
Robert E. Price: Contributing so much to a very successful second quarter.
Robert E. Price: I, especially want to acknowledge a few of our warehouse club managers.
Robert E. Price: These locations were challenged operationally because of the very high sales volumes during December.
Robert E. Price: I also want to thank our merchandising teams in the U.S. and in our countries for their outstanding management of inventory flow during the holidays. Consulting in Strong Sales, Low markdowns, and excellent inventory turn. Now I will ask Michael to continue with his presentation. Thank you, Robert.
Robert E. Price: I also want to thank our merchandising teams in the U S and in our countries.
Robert E. Price: Are there outstanding management of inventory flow during the holidays, resulting in strong sales.
Robert E. Price: Low markdowns and excellent inventory turns.
Robert E. Price: Now I will ask Michael to continue with his presentation.
Michael L. McCleary: Thank you Robert we had a strong second quarter as both total revenues and net merchandise sales reached almost $1 3 billion.
Michael L. McCleary: We had a strong second quarter as both total revenues and up-merchandise sales reached almost $1.3 billion. During the first half of our fiscal year, total revenues and up-merchandise sales reached almost $2.5 billion and $2.4 billion, respectively. During the second quarter, net merchandise sales increased by 13% or 9% in constant currency, and comparable net merchandise sales increased 8.8% or 5.2% in constant currency. For the first half of the fiscal year, net merchandise sales increased by 11.9% or 8% in constant currency, and comparable net merchandise sales increased by 8.4% or 4.7% in constant currency. By segment, in Central America, where we had 30 clubs at quarter end, net merchandise sales increased 12.4% or 8.8% in constant currency, with an 8.1% increase in comparable net merchandise sales or 4.6% in constant currency. All of our markets in Central America had positive comparable net merchandise sales growth.
Michael L. McCleary: During the first half of our fiscal year total revenues and net merchandise sales reached almost $2 5 billion and $2 4 billion respectively.
During the second quarter net merchandise sales increased by 13% or 9% in constant currency and comparable net merchandise sales increased eight 8% or five 2% in constant currency.
Michael L. McCleary: For the first half of the fiscal year net merchandise sales increased by 11, 9% or 8% in constant currency and comparable net merchandise sales increased by eight 4% or four 7% in constant currency.
Michael L. McCleary: By segment in Central America, where we had 30 clubs at quarter end net merchandise sales increased 12, 4% or eight 8% in constant currency with an eight 1% increase in comparable net merchandise sales or four 6% in constant currency.
Michael L. McCleary: All of our markets in Central America had positive comparable net merchandise sales growth.
Michael L. McCleary: Our Central America segment contributed approximately 500 basis points of positive impact to the growth in consolidated comparable net merchandise sales for the quarter. We opened our sixth warehouse club in Guatemala in November 2023 and our fourth warehouse club in El Salvador in February 2024. In the Caribbean, where we had 14 clubs at quarter end, net merchandise sales increased 7.2% or 8.9% in constant currency, and comparable net merchandise sales increased 6.3% or 8% in constant currency. All of our markets in this segment had positive comparable net merchandise sales growth.
Michael L. McCleary: Our Central America segment contributed approximately 500 basis points of positive impact to the growth in consolidated comparable net merchandise sales for the quarter.
Michael L. McCleary: We opened our sixth warehouse club in Guatemala in November 2023, and our fourth warehouse club in El Salvador in February 2024.
Michael L. McCleary: In the Caribbean, where we had 14 clubs at quarter end net merchandise sales increased seven 2% or eight 9% in constant currency and comparable net merchandise sales increased six 3% or 8% in constant currency.
Michael L. McCleary: All of our markets in this segment had positive comparable net merchandise sales growth.
Michael L. McCleary: Our Caribbean region contributed approximately 180 basis points of positive impact to growth and consolidated comparable net merchandise sales for the second quarter. In Colombia, where we had 10 clubs open at the end of our second quarter, net merchandise sales increased 34.5%, or 11% in constant currency, and comparable net merchandise sales increased 20.7%, but decreased 40 basis points in constant currency. Columbia contributed approximately 200 basis points of positive impact to the growth in consolidated comparable net merchandise sales for the quarter. In terms of merchandise categories, when comparing our second quarter sales to the same period in the prior year, our food category grew approximately 7%, our non-foods category increased approximately 13%, our food services and bakery categories increased approximately 24%, and our health services, including optical, audiology, and pharmacy, increased approximately 48%.
Michael L. McCleary: Caribbean region contributed approximately 180 basis points of positive impact to the growth in consolidated comparable net merchandise sales for the second quarter.
Michael L. McCleary: In Colombia, where we had 10 clubs opened up at the end of our second quarter net merchandise sales increased 34, 5% or 11% in constant currency and comparable net merchandise sales increased 27%, but decreased 40 basis points in constant currency.
Michael L. McCleary: Colombia contributed approximately 200 basis points of positive impact to the growth in consolidated comparable net merchandise sales for the quarter.
Michael L. McCleary: In terms of merchandise categories, when comparing our second quarter sales to the same period in the prior year, our boots category grew approximately 7% our non foods category increased approximately 13%, our food services and bakery categories increased approximately 24% and our health services, including optical Audiology and farm.
Michael L. McCleary: Mercy increased approximately 48%.
Michael L. McCleary: Membership accounts grew 5% versus the prior year to almost 1.9 million accounts, with a strong 12-month renewal rate of 88.3% at the end of our second quarter. Membership income for the second quarter was $18.5 million, an increase of 14.6% over the same period last year. In the first six months of fiscal year 2024, we raised the annual membership fee for two cards by $5 for all membership types in Blunt's market. Platinum membership accounts for 9.6% of our total membership base as of the end of our second quarter, an increase from 8.2% as of the end of our prior year's second quarter. Total gross margin for the second quarter of fiscal year 2024 as a percentage of net merchandise sales decreased 30 basis points to 15.7% versus 16% in the second quarter of fiscal year 2023. The 30 basis point decrease in rate was primarily due to the removal of a COVID premium from merchandise pricing and a reduction in liquidity premiums for items sold in Trinidad.
Membership accounts grew 5% versus the prior year to almost $1 9 million accounts with a strong 12 month renewal rate of 88, 3% at the end of our second quarter.
Michael L. McCleary: Membership income for the second quarter was $18 5 million an increase of 14, 6% over the same period last year and the first six months of fiscal year 2020 for re raised the annual membership fee for two cards by $5 for our membership types of box markets.
Michael L. McCleary: Platinum membership accounts were nine 6% of our total membership base as of the end of our second quarter and increased from eight 2% as of the end of our prior year second quarter.
Total gross margin for the second quarter of fiscal year 2024, as a percentage of net merchandise sales decreased 30 basis points to 15, 7% versus 16% in the second quarter of fiscal year 2023.
Michael L. McCleary: The 30 basis point decrease in rate was primarily due to the removal of a COVID-19 premium from merchandise pricing and a reduction in liquidity premiums for items sold in Trinidad total gross margin increased to $19 7 million or approximately 11% versus the same quarter of the prior fiscal year.
Michael L. McCleary: Total gross margin increased $19.7 million, or approximately 11%, versus the same quarter of the prior fiscal year. However, total revenue margins decreased 20 basis points to 17.1% of total revenue when compared to the same period last year, primarily due to a decrease in total gross margin as a percent of net merchandise sales. During the second quarter, our average sales ticket grew by 2.7% and transactions grew 10% versus the same period in the prior year. For the six-month period, our average ticket grew by 2.5%, and transactions grew 9.1% versus the same period in the prior year. The average price per item increased approximately 3.9% year-over-year, with average items per basket decreasing approximately 1.4% compared to the same period of the prior year. Total SG&A expenses decreased to 12.2% of total revenues for the second quarter of fiscal year 2024, compared to 12.6% for the second quarter of fiscal year 2023.
Michael L. McCleary: Total revenue margins decreased 20 basis points to 17, 1% of total revenue when compared to the same period last year, primarily due to the decrease in total gross margin as a percent of net merchandise sales during.
Michael L. McCleary: During the second quarter, our average sales ticket grew by two 7% and transactions grew 10% versus the same period in the prior year.
Michael L. McCleary: For the six months period, our average ticket grew by two 5% and transactions grew nine 1% versus the same prior year period.
Michael L. McCleary: The average price per item increased approximately three 9% year over year with average items per basket decreasing approximately one 4% compared to the same period of the prior year.
Michael L. McCleary: Oh SG&A expenses decreased to 12, 2% of total revenues for the second quarter of fiscal year 2024, compared to 12, 6% for the second quarter of fiscal year 2023. This 40 basis point decrease is largely due to $7 $7 million of separation costs associated with the Chief Executive Officer departure recorded.
Michael L. McCleary: In the prior year period.
Michael L. McCleary: This 40 basis point decrease is largely due to $7.7 million of separation costs associated with the chief executive officer's departure recorded in the prior year period. General and administrative expenses increased 3% of total revenues for the second quarter of fiscal year 2024, compared to 2.8% for the second quarter of fiscal 2023. The 20-assist point increase is primarily due to increased compensation costs and travel along with certain non-recurring professional fees. Following our second quarter purchase of our formerly leased Via Brazil Club in Panama, we expect annualized after-tax savings of approximately $1.1 million from reduced rent and depreciation due to the longer useful lives expected from this property as a result of its acquisition. However, this will initially be largely offset by approximately $1 million in related annualized after-tax financing costs.
Michael L. McCleary: General and administrative expenses increased 3% of total revenues for the second quarter of fiscal year 2024, compared to two 8% for the second quarter of fiscal 2023. The 20 basis point increase was primarily due to increased compensation costs and travel along with certain nonrecurring professional fees.
Michael L. McCleary: Following our second quarter purchase of our formerly leased via Brazil Club in Panama, We expect annualized after tax savings of approximately $1 1 million.
Michael L. McCleary: From reduced rent and depreciation due to the longer useful lives expected from this property as a result of its acquisition. However, this will initially be largely offset by approximately $1 million and related annualized after tax financing costs.
Okay.
Michael L. McCleary: Operating income for the quarter increased 18, 2% from the same period last year to $63 6 million operating income for the first six months of fiscal year 2024 increased 11, 4% from the same period last year to $121 8 million.
Michael L. McCleary: In the second quarter of fiscal year 2024, we recorded a $7 $1 million net loss and total other expense compared to a $6 2 million net loss in the same period last year.
Michael L. McCleary: Operating income for the quarter increased 18.2% from the same period last year to $63.6 million. Operating income for the first six months of fiscal year 2024 increased 11.4% from the same period last year to $121.8 million. In the second quarter of fiscal year 2024, we recorded a $7.1 million net loss in total elder expense compared to a $6.2 million net loss in the same period last year.
Michael L. McCleary: This increase was primarily due to increased foreign currency revaluation losses of $1 2 million.
Michael L. McCleary: Which were primarily related to the impact of the strengthening of the Costa Rica colon on our U S dollar cash balances and an increase in transaction costs for a conversion of illiquid currencies as Europe by $4 million. These.
Michael L. McCleary: These expenses were partially offset by higher interest income of $1 3 million from significantly more investments of surplus cash at higher yields.
Michael L. McCleary: Effective tax rate for the second quarter of fiscal 2024, it came in lower than last year at 35% versus 34% a year ago. The decrease in the effective tax rate is primarily due to non recurrence of the separation costs associated with the CEO departure in the prior year and the discrete impacts related to foreign currency transactions during the quarter.
Michael L. McCleary: This increase is primarily due to increased foreign currency revaluation losses of $1.2 million, which were primarily related to the impact of the strengthening of the Costa Rican cologne on our U.S. dollar cash balances, and an increase in transaction costs for conversion of illiquid currencies of $0.4 million. These expenses were partially offset by higher interest income of $1.3 million from significantly more investments of surplus cash at higher yields. Our effective tax rate for the second quarter of fiscal 2024 came in lower than last year at 30.5% versus 34% a year ago.
Michael L. McCleary: A go forward basis, we estimate an annualized effective tax rate of about 31% to 32%.
Net income for the second quarter of fiscal year, 2024 was $39 3 million or $1 31 per diluted share compared to $31 3 million or $1 tuber diluted share in the second quarter of fiscal 2023.
Michael L. McCleary: Net income for the first six months of fiscal 2024 was $77 3 million or $2 54 per diluted share compared to $64 3 million.
Michael L. McCleary: The decrease in the effective tax rate is primarily due to the non-recurrence of the separation costs associated with the CEO departure in the prior year and the discrete impacts related to foreign currency transactions during the quarter. On a go-forward basis, we estimate an annualized effective tax rate of about 31 to 32%. Net income for the second quarter of fiscal year 2024 was $39.3 million, or $1.31 per diluted share, compared to $31.3 million, or $1.02 per diluted share, in the second quarter of fiscal 2023. Net income for the first six months of fiscal 2024 was $77.3 million, or $2.54 per diluted share, compared to $64.3 million, or $2.07 per diluted share, in the comparable prior year period. Adjusted net income for the second quarter of fiscal 2024 was $39.3 million, or an adjusted $1.31 per diluted share, compared to adjusted net income of $38.5 million, or an adjusted $1.25 per diluted share, in the comparable prior year period.
Michael L. McCleary: Our $2 seven per diluted share in the comparable prior year period.
Michael L. McCleary: Adjusted net income for the second quarter of fiscal 2024 was $39 $3 million.
Michael L. McCleary: For an adjusted $1 31 per diluted share compared to adjusted net income of $38 5 million.
Michael L. McCleary: Adjusted $1 25 per diluted share in the comparable prior year period.
Michael L. McCleary: Adjusted EBITDA for the second quarter of fiscal 2024 was $84 1 million.
Michael L. McCleary: Third to $79 4 million in the same period last year.
Michael L. McCleary: Adjusted net income for the first six months of fiscal year, 2024 was $77 $3 million or an adjusted $2 54 per diluted share compared to adjusted net income of $73 $6 million or an adjusted $2 37 per diluted share in the comparable prior year period.
Michael L. McCleary: Adjusted EBITDA for the first six months of fiscal 2024 was $161 $9 million compared to $154 6 million in the same period last year.
Michael L. McCleary: Moving onto our strong balance sheet, we ended the quarter with cash cash equivalents and restricted cash totaling $182 6 million.
Michael L. McCleary: From a cash flow perspective, net cash provided by operating activities totaled $127 7 million for the first six months of fiscal year 2024, compared to $116 7 million for the same prior year period.
Michael L. McCleary: Adjusted EBITDA for the second quarter of fiscal 2024 was $84.1 million, compared to $79.4 million in the same period last year. Adjusted net income for the first six months of fiscal year 2024 was $77.3 million, or an adjusted $2.54 per diluted share, compared to adjusted net income of $73.6 million, or an adjusted $2.37 per diluted share in the comparable prior year period. Adjusted EBITDA for the first six months of fiscal 2024 was $161.9 million, compared to $154.6 million in the same period last year.
Michael L. McCleary: Shifting working capital generated from changes in our merchandise inventory and accounts payable positions for the first six months of the fiscal year contributed $8 7 million of additional cash flow compared to the same prior year period.
Michael L. McCleary: Net cash used in investing activities increased by $9 2 million for the first half of fiscal 2024 compared to the same prior year period, primarily as a result of an increase in purchases of short term investments and additions to property and equipment.
Michael L. McCleary: Net cash used in financing activities during the first six months increased by $89 3 million.
Michael L. McCleary: Primarily from the result of the share buyback program, we completed during the quarter and lower proceeds from long term bank borrowings compared to the same period a year ago winter.
Michael L. McCleary: Moving on to our strong balance sheet, we ended the quarter with cash, cash equivalents, and restricted cash totaling $182.6 million. From a cash flow perspective, net cash provided by operating activities totaled $127.7 million for the first six months of fiscal year 2024, compared to $116.7 million for the same prior year period. Shifts in working capital generated from changes in our merchandise, inventory, and accounts payable positions for the first six months of the fiscal year contributed $8.7 million of additional cash flow compared to the same prior year period. Net cash used in investing activities increased by $9.2 million for the first half of fiscal 2024 compared to the same prior year period, primarily as a result of an increase in purchases of short-term investments and additions to property and equipment.
Michael L. McCleary: When reviewing our cash balances. It is important to note that as of the end of our second quarter, we had $63 $8 million of cash cash equivalents and short term investments denominated in local currency in Trinidad.
Michael L. McCleary: Which we cannot readily convert to U S dollars.
Michael L. McCleary: On February one 2024, the company's board of directors declared its annual cash dividend and the total amount of $1 16 per share with 58 paid in February and 58 payable on August <unk>.
Michael L. McCleary: This represents a 26% increase over last year's <unk> 92 per share dividend.
Michael L. McCleary: The decision to increase the annual dividend by 26% by the board of directors reflects the board's confidence in price Mark and the strength of its cash generating activities.
Michael L. McCleary: Additionally, the company has decided to distribute excess cash to stockholders in the form of a special dividend.
Michael L. McCleary: On April three 2024, our board of directors declared a onetime $1 per share special dividend payable on April 32024 to stockholders of record on April 19 2024.
Michael L. McCleary: Net cash used in financing activities during the first six months increased by $89.3 million, primarily as a result of the share buyback program we completed during the quarter and lower proceeds from long-term bank borrowings compared to the same period a year ago. When reviewing our cash balances, it is important to note that as of the end of our second quarter, we had $63.8 million of cash, cash equivalents, and short-term investments denominated in local currency in Trinidad and Honduras, which we could not readily convert to U.S. dollars. On February 1st, 2024, the company's board of directors declared its annual cash dividend in the total amount of $1.16 per share, 58 cents paid in February and 58 cents payable in August.
Michael L. McCleary: Now onto our growth drivers starting with real estate. We are thrilled to have opened our Santa Ana club and El Salvador on February 15, 2020 for the Santa Ana Club as our fourth club in El Salvador, and our 54th Warehouse Club overall, we have also purchased land and plan to open our ninth warehouse club in Costa Rica, located in car Tyro approximately 10 miles.
Michael L. McCleary: East from the nearest clubs in the greater San Jose Metropolitan area. This club will be built on a six acre property and is anticipated to open in early 2025.
Michael L. McCleary: Once this new club is open we will operate 55 warehouse clubs in total.
Michael L. McCleary: Additionally, we are currently remodeling several of our high volume clubs, which are in San Pedro Sula, Honduras, Santera, Dominican Republic, and Puerto Spain, Trinidad and Tobago as well as expanding one of our clubs in San Salvador El Salvador.
Michael L. McCleary: As mentioned previously we have completed the purchase of our VA Brasil club in Panama from our previous landlord or via Brazil Club is the club with the highest sales volume in our Panama market and we are very happy that through this acquisition. We can lock in long term certainty as to our access to this key location in Panama.
Michael L. McCleary: This represents a 26% increase over last year's $0.92 per share dividend. The decision to increase the annual dividend by 26% by the Board of Directors reflects the Board's confidence in PriceSmart and the strength of its cash-generating activities. Additionally, the company has decided to distribute excess cash to stockholders in the form of a special dividend. On April 3rd, 2024, our Board of Directors declared a one-time, $1 per share special dividend payable on April 30th, 2024 to stockholders of record on April 19th, 2024.
Michael L. McCleary: Finally, we continue to actively seek ways to improve our distribution infrastructure to better serve our members lower than net landed cost of our merchandize and enhance operating efficiencies. In this respect we have made significant progress towards consolidating deliveries of merchandise purchased from local vendors directly to our new distribution center in Panama.
Michael L. McCleary: We have also recently signed a lease agreement for a distribution center in Guatemala, and approved plans to build a distribution center in Trinidad on lease plan.
Michael L. McCleary: Turning now to membership site.
Michael L. McCleary: As we've highlighted in previous calls our private label members selection, Brian continues to be a significant area of focus based on the great value. It brings to our members during the first six months of fiscal year 2020 for our private label sales represented 27, 1% of our total net merchandise sales.
Michael L. McCleary: Now on to our growth drivers. Starting with real estate, we are thrilled to have opened our Santa Ana Club in El Salvador on February 15th, 2024. The Santa Ana Club is our fourth club in El Salvador and our 54th warehouse club overall. We have also purchased land and plan to open our ninth warehouse club in Costa Rica, located in Cartago, approximately 10 miles east from the nearest warehouse clubs in the greater San Jose metropolitan area. This club will be built on a six-acre property and is anticipated to open in early 2025.
Michael L. McCleary: Up 120 basis points from 25, 9% in the comparable period of fiscal year 2023.
Michael L. McCleary: We also continued to focus on health services.
Michael L. McCleary: Currently have 52 locations with optical centers and expect to have 53 opened by the end of our fiscal year. Our optical program provides for free eye exams with <unk> membership and we performed over 38000 eye exams during the quarter.
Michael L. McCleary: We currently have pharmacy centers in all eight of our warehouse clubs in Costa Rica, and three warehouse clubs in Panama.
Michael L. McCleary: Once this new club is open, we will operate 55 warehouse clubs in total. Additionally, we are currently remodeling several of our high-volume clubs, which are in San Pedro Sula, Honduras; Santiago, Dominican Republic; Puerto Spain, Trinidad, and Tobago, as well as expanding one of our clubs in San Salvador, El Salvador. As mentioned previously, we have completed the purchase of our Via Brazil Club in Panama from our previous landlord. Our Via Brazil Club is the club with the highest sales volume in our Panama market, and we are very happy that, through this acquisition, we can lock in long-term certainty as to our access to this key location in Panama. Finally, we continue to actively seek ways to improve our distribution infrastructure to better serve our members, lower the net landed cost of our merchandise, and enhance operating efficiencies.
Michael L. McCleary: We expect to open two more pharmacies in Panama and foreign Guatemala during the fiscal year.
Michael L. McCleary: With respect to the Audiology centers. We currently have 26 centers open we expect to open two additional centers in Panama in one center issue of Jamaica, and Trinidad in fiscal year 2024.
Michael L. McCleary: Yes.
Michael L. McCleary: Optical services are also an important component of our contributions to the communities in which our clubs are located.
In partnership with price Philanthropies, <unk> vision program price Mart optometrist perform <unk> and price collapsed purchases the glasses from our optical centers. We recently expanded our <unk> revision program to Guatemala, where 40% of the children, who participate in this program needed an eye exam and 90% of the children who received <unk>.
Michael L. McCleary: <unk> received them for the first time.
Michael L. McCleary: Our annual <unk> per day I look at your on our together for Education campaign is an important funding source for the <unk> program more than that is it is a prime example of price Mark its members and the price smart and price per Lanthopine foundations coming together to support education. Our most recent campaign took place in the fall of 2020.
Michael L. McCleary: In this respect, we have made significant progress towards consolidating deliveries of merchandise purchased from local vendors directly to our new distribution center in Panama. We have also recently signed a lease agreement for a distribution center in Guatemala and approved plans to build a distribution center in Trinidad on a lease plan. Turning now to membership sites. As we've highlighted in previous calls, our private label members selection brand continues to be a significant area of focus based on the great value it brings to our members. During the first six months of fiscal year 2024, our private label sales represented 27.1% of our total net merchandise sales.
Michael L. McCleary: Three.
Set a new record of more than $2 2 million in donations collected from members both in club and through <unk> Dot Com price.
Michael L. McCleary: <unk> atrophy as foundation match. These donations dollar for dollar up to a maximum amount for each country, yielding an additional $850000, bringing the grand total raised to nearly $3 1 million.
Michael L. McCleary: Our third growth driver is to drive sales by providing omnichannel shopping options for our members. These sales were primarily generated through price Mart dot com and our mobile App and are complemented by other third party last mile delivery services during the second quarter total net merchandise sales through digital channels increased 31%.
Michael L. McCleary: Versus the same period in the prior year and represented a record $63 7 million or five 1% of total net merchandise sales total orders placed directly on <unk> dot com and our App increased 26, 6% and the average transaction value increased one 8% versus the prior year period.
Michael L. McCleary: That's up 120 basis points from 25.9% in the comparable period of fiscal year 2023. We also continue to focus on health services. We currently have 52 locations with optical centers and expect to have 53 open by the end of our fiscal year. Our optical program provides four free eye exams with every membership, and we performed over 38,000 eye exams during the quarter.
Michael L. McCleary: As of February 29, 2020 for approximately 64% of our members had created an online profile with price might dot com or our App and 16, 5% of our total membership base has made a purchase on price Monotype com or our app.
Michael L. McCleary: We currently have pharmacy centers in all eight of our warehouse clubs in Costa Rica and three warehouse clubs in Panama. We expect to open two more pharmacies in Panama and four in Guatemala during the fiscal year. With respect to audiology centers, we currently have 26 centers open.
Michael L. McCleary: We believe that there are significant growth opportunities in our digital channel and we will continue to invest in this part of our business to provide an enhanced omnichannel experience and additional value to our members.
Additionally, we are implementing a new tool called relaxed to modernize our supply chain management.
Michael L. McCleary: We started this project in 2023 and it should be completed in 2025.
Michael L. McCleary: We expect to open two additional centers in Panama and one center in the East of Jamaica and Trinidad in fiscal year 2024. Optical services are also an important component of our contributions to the communities in which our clubs are located. In partnership with Price Philanthropies' Appendare Corsera Vision program, PriceSmart optometrists perform eye exams, and Price Philanthropies purchases the glasses from our optical centers.
Michael L. McCleary: <unk> is positioned to become an integral part of our strategy to enhance our inventory planning process, making it more efficient by making our operations data driven autonomous and adapted this partnership with relax as crucial as it resonates with our strategy to grow sales by offering high quality good at competitive prices driven through supply chain efficiency.
Michael L. McCleary: And back office productivity, we plan to use <unk> to automate and increase the accuracy of our inventory forecasting as well as for pricing and promotional management.
Michael L. McCleary: We recently expanded our Appendare Corsera Vision program to Guatemala, where 40% of the children who participated in this program needed an eye exam, and 90% of the children who received glasses received them for the first time. Our annual Juntos por la Educacion, or Together for Education, campaign is an important funding source for the Aprender y Crescer program. More than that, it is a prime example of PriceSmart, its members, and the PriceSmart and Price Philanthropies Foundations coming together to support education. Our most recent campaign took place in the fall of 2023 and set a new record of more than $2.2 million in donations collected from members, both in-club and through PriceSmart.com. The Price Philanthropies Foundation matched these donations, dollar for dollar, up to a maximum amount for each country, yielding an additional $850,000, bringing the grand total raised to nearly $3.1 million.
Michael L. McCleary: Okay switching gears slightly environmental and social responsibility continues to be an important component of how we approach our business and add value to the membership we do our best to incorporate practices that use natural resources responsibly just to give a quick update we currently have seven recycling centers opened with two hour Salvador 300.
Michael L. McCleary: And two in Guatemala on.
Michael L. McCleary: On average around 15000 pounds of recycled material is being collected monthly in each location. We are on track to open for recycling centers in the Dominican Republic, and one more in Guatemala by the end of fiscal year 2024, you can find more information about price mark philanthropic and corporate social responsibility efforts on price Mart Dot org.
Michael L. McCleary: Looking forward a little into our current third quarter, our comparable net merchandise sales for the four weeks ended March 31, 2024 were up five 6% or two 9% in constant currency with both Costa Rica, and Colombia contributing positively from a foreign currency exchange rate perspective.
Michael L. McCleary: Our third growth driver is to drive sales by providing omni-channel shopping options for our members. These sales are primarily generated through PriceSmart.com and our mobile app, and are complemented by other third-party last-mile delivery services. During the second quarter, total net merchandise sales through digital channels increased 31% versus the same period in the prior year and represented a record $63.7 million, or 5.1% of total net merchandise sales. Total orders placed directly on PriceSmart.com and our app increased 26.6%, and the average transaction value increased 1.8% versus the prior year period. As of February 29, 2024, approximately 64% of our members had created an online profile with PriceSmart.com or our app, and 16.5% of our total membership base had made a purchase on PriceSmart.com or our app.
Michael L. McCleary: It is important to note that this year on year comparison is impacted by the timing of the Easter holiday period.
This year good Friday, when we closed all our clubs and Easter Sunday, when we close our clubs in Aruba, and Barbados fill in March whereas last year that fell in April.
None: In closing we are proud of another successful quarter, a great start to our third quarter and our team members who make it all possible. Thank you for joining our call today I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers questions.
Operator: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone you will hear a prompt that your hand has been rate should you wish to decline from the polling process. Please press star followed by the number too.
Michael L. McCleary: We believe that there are significant growth opportunities in our digital channel, and we will continue to invest in this part of our business to provide an enhanced omni-channel experience and additional value to our members. Additionally, we are implementing a new tool called RELAX to modernize our supply chain management. We started this project in 2023, and it should be completed in 2025.
Operator: If you are using a speaker phone please lift the handset before pressing on in Q.
Operator: One moment, while we queue up for questions.
Operator: Yeah.
Michael L. McCleary: RELAX is positioned to become an integral part of our strategy to enhance our inventory planning process, making it more efficient by making our operations data-driven, autonomous, and adaptive. This partnership with RELAX is crucial as it aligns with our strategy to grow sales by offering high-quality goods at competitive prices driven through supply chain efficiency and back-office productivity. We plan to use RELAX to automate and increase the accuracy of our inventory forecasting as well as for pricing and promotion management.
Operator: Your first question comes from Mr. Jon Brandt from Oppenheimer. Please go ahead.
Operator: Sure.
Jonathan Paul Braatz: Robert You mentioned in your opening comments that.
Obviously December was a pretty good month, but you said there were some challenges and some and.
Jonathan Paul Braatz: And in meeting that demand.
Jonathan Paul Braatz: Can you speak a little bit about those those challenges and does it impact the <unk>.
Jonathan Paul Braatz: Did you incur some additional costs.
Michael L. McCleary: Switching gears slightly, environmental and social responsibility continues to be an important component of how we approach our business and add value to the membership. We do our best to incorporate practices that use natural resources responsibly. Just to give a quick update, we currently have seven recycling centers open, with two in El Salvador, three in Honduras, and two in Guatemala. On average, around 15,000 pounds of recycled material are collected monthly in each location.
Robert E. Price: Thanks for the question I had.
None: Maybe it didn't.
None: Despite it very well.
None: We have some locations first of all.
None: We did volumes in certain locations. It really went beyond anything I think I would've thought with they were capable of doing just based on the physical limitations of some of our locations.
None: I really was trying to complement managers, who were under tremendous stress just to move that volume through those locations.
Michael L. McCleary: We expect to open four recycling centers in the Dominican Republic and one more in Guatemala by the end of fiscal year 2024. You can find more information about PriceSmart's philanthropic and corporate social responsibility efforts on PriceSmart.org. Looking forward a little into our current third quarter, our comparable net merchandise sales for the four weeks ended March 31st, 2024 were up 5.6% or 2.9% in constant currency, with both Costa Rica and Colombia contributing positively from a foreign currency exchange rate perspective. However, it is important to note that this year-on-year comparison is impacted by the timing of the Easter holiday period. This year, Good Friday, when we close all our clubs, and Easter Sunday, when we close our clubs in Aruba and Barbados, fell in March, whereas last year they fell in April.
None: On various days during December.
None: I don't I don't think per se that it resulted in an additional expense, but I think it was very very tough on our management team.
None: And a number of places just yield.
Deal with what was the throughput.
None: Sales.
Sorry.
None: On hand, but I think they handle it really well the expenses.
None: To be.
None: Well in line.
None: It was tough I mean, I don't know if I personally had debt on one of those locations if I could do it.
None: Okay. Thank you.
None: Turning to Colombia.
None: Colombia currency has strengthened there.
None: Your your comp store sales there were.
None: Were flattish in the quarter it seems like the.
The impression I'm getting at is the overall market in Colombia is getting.
Operator: In closing, we are proud of another successful quarter, a great start to our third quarter, and our team members who make it all possible. Thank you for joining us on our call today. I will now turn the call over to the operator to take your questions. Operator, you may now start taking our caller's questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any key.
None: Any better.
None: Can you speak maybe.
None: Little bit about the Colombian market and and how you see it generally speaking in terms of the economic environment.
None: Okay.
None: I think that.
None: Politically as well as financially there's been a lot of improvements in Colombia.
In the last year.
None: And we're certainly.
None: Reaping the benefits of those improvements.
None: From my knowledge I haven't been in Colombia in a while and I'm planning a trip.
None: I think we're running our business well and I think our reputation there is really really good from what.
None: We hear in the way our members.
None: Feel about it.
Jonathan Paul Braatz: One moment while we queue up the questions. Your first question comes from Mr. John Braatz from Oppenheimer. Please go ahead. Robert, you mentioned in your opening comments that, you know, obviously December was a pretty good month, but you said there were some challenges in meeting that demand. Can you speak a little bit about those challenges and how they impacted the company, did you incur some additional costs? Thanks for the question.
None: It's been a lot of turnaround in Colombia.
None: I think the other thing that Tim mentioned in Colombia is that we made a decision.
None: Oh, probably close to a year ago.
None: Become.
None: Reduced margins a bit.
None: Two.
None: Turning to our pack sizes on some of the <unk>.
None: It just it becomes too expensive the large pack sizes and I think so.
None: Most of those actions have really strengthened our market position I think we're at a pretty good place in Colombia.
Robert E. Price: I maybe didn't... We have some locations. First of all, we did volumes in certain locations that really went beyond anything I think I would have thought they were capable of doing just based on the physical limitations of some of our locations. I really was trying to compliment managers who were under tremendous stress just to move that volume through those locations on various days during December. I don't think, per se, that it resulted in additional expense, but I think it was very, very tough on our management, and a number of places, on hand. I think they handle it really well, and the expenses... All seem to be well in line at one of those locations, if I could. Okay, thank you.
Unfortunately, it's still challenging to us.
None: <unk> locations in the big cities.
None: Managing and Bogota.
None: You too.
None: Work on that because we think there's more opportunity, but I feel pretty good about Colombia, I think we got a good management team there.
As we have put behind there.
None: Things are really improving.
None: Okay, and then lastly.
None: Robert Michael the New Costa Rica store. Thank you.
None: Noted it was 10 miles from the Neurostar.
Robert E. Price: Turning to Columbia, the... Columbia, the currency has strengthened there. Your comp store sales there were flattish in the quarter. The impression I'm getting is that the overall market in Colombia is getting better. Can you speak maybe a little bit about the Colombian market and how you see it, generally speaking, in terms of the economic environment? I think that politically as well as financially, there have been a lot of improvements in Columbia. We're certainly reaping the benefits. For more information, visit www.pricesmart.com. From my knowledge, I haven't been to Columbia in a while, and I'm planning a trip. I think we're running our business well, and I think our reputation there is really, really good from what I've heard. Please see the complete disclaimer at https://sites.google.com or at https://www.google.com/policies.
None: When you open a new store in Colombia, and other places there is a little bit of cannibalization.
Would you expect.
None: Anything more or less.
None: From this new store for store openings versus what you've seen in the past.
None: As far as the transfer of sales there'll be some transfer of sales I think it will be.
None: More or less the way we would have had another close to rhoecus locations, where we're opening not too far away on the other hand, our our track record in Costa Rica has been that we backfill pretty quickly in terms of recovery in those sales.
None: <unk> had been transferred I think overall because we are.
Robert E. Price: There's been a lot of turnaround in Colombia. I think the other thing to mention in Colombia is that we made a decision... close to a year ago, to become... Produced by Hctor Lpez, change our pack sizes on some of the items because they have just become too expensive under the large tax sizes.
Building our.
None: Sales volume.
None: Market position in Costa Rica, we're going to buy better.
None: Distribute better and.
None: But overall, it's going to help all the clubs just to have that extra bump in the market.
None: Okay. Thank you.
None: Okay.
Robert E. Price: Both of those actions have really strengthened our market. We're in a pretty good place in Columbia. Unfortunately, it's still challenging to find locations in the big cities, like Medelln and Bogota, and we can continue to work on that because we think there's more opportunity. I feel pretty good about Columbia. I think we've got a good management team there. We have a good buy in there. Okay, and then lastly, Robert and Michael, the new Costa Rican store. I think you noted it was 10 miles from the nearest store. When you open a new store in Columbia and other places, there is a little bit of cannibalization. Would you expect anything more or less from this new store opening versus what you've seen in the past?
Your next question comes from the line of Mr. Hector Maya from Scotiabank. Please go ahead.
Hctor Manuel Maya Lpez: Alright, Thank you Robert and Michael for taking my questions. The first one would be regarding the kind of wide potential that you see for new opening down the road.
Hctor Manuel Maya Lpez: Aside from Colombia, where else would you be seeing the most opportunity and what would be the long term potential for countries like and so.
Hctor Manuel Maya Lpez: As far as the transfer of sales, there'll be some transfer of sales, and I think it'll be more or less the way we would have had in other Costa Rica locations where we're opening not too far away. On the other hand, our track record in Costa Rica has been that we backfill pretty quickly in terms of recovering those sales that had been transferred, and I think overall, because of the market position in Costa Rica, we're going to buy better. www.pricemart.com Probably, overall, it's going to help all the clubs just to have that extra club. Okay, thank you. Your next question comes from the line of Mr. Hector Maya from Scotiabank. Please go ahead.
Or what demand or are there is in the Caribbean.
Hctor Manuel Maya Lpez: Nick and what potentially minimum wages could be a factor.
None: Let me make sure I understand your question are you where is your question about opportunity.
None: Countries other than Columbia.
None: Yes, aside from Colombia in markets like inside of that or what the molla or evening, Mike in the Caribbean.
None: It's a potential that you see there.
None: Please.
None: I think.
None: Without getting too specific.
None: Yes.
None: There are continued to be opportunities.
None: Some of those countries and.
Hctor Manuel Maya Lpez: Hi, thank you Robert and Michael for taking my questions. The first one would be regarding the kind of wide potential that you see for new openings down the road. And aside from Colombia, where else would you be seeing the most opportunity, and what would be the long-term potential for countries like El Salvador, Guatemala, or others in the Caribbean like Jamaica, where minimum wages could be a factor? To make sure I understand your question. Was your question about opportunity? Countries other than Colombia?
None: Where.
None: We continue to identify the right properties.
None: To take advantage of those opportunities.
None: I don't want to be too specific I think.
None: I would say regarding.
Hi, My salary, Jamaica, However, you want to say it.
None: It's been a good market for us and we think there is additional opportunity there and I would say the same thing your backlog amounts.
None: And maybe El Salvador, as well I mean there.
I think also I feel really pretty good about those regions because.
Robert E. Price: Yeah, aside from Colombia, in markets like El Salvador, Guatemala, or even Jamaica in the Caribbean, the widespread potential that you see there. I think that, um..., without getting too specific, there will continue to be opportunities in some of those countries and we will continue to identify the right properties and take advantage of those opportunities. I don't want to be too specific, I think...
None: Let's see.
Change in.
None: Our approach to sourcing and in services.
None: Big picture macro moving more.
None: Production out of Asia to the region, we're in <unk>.
None: All of that era.
This is a very positive sign for us.
None: The region and also for Us Matt.
None: Would include all the countries you mentioned.
None: Got it thank you very very clear and.
Robert E. Price: I could say regarding Jamaica, however you want to say it, that it's been a good market for us, and we think there is a good market for us at www.pricesmart.com and maybe Al Salvador as well. You know, I also feel really pretty good about those regions because, you know, with the change in our approach to sourcing and the big picture macro moving more. Production out of Asia to the region we're in. ®MD-BO This is a very positive sign, and also for us. That would include all the countries you...
None: Could you also please talk a bit more about the increase in general and administrative expenses.
None: Compensation and travel costs, and if you could give us also a sense of.
None: What happened in the nonrecurring expenses there too.
None: Hi, Hector Yes, just basically overall, we're continuing to review our compensation levels at all levels of management and so there was some year on year increases there.
Michael L. McCleary: Thank you. Very, very clear. And could you also please talk a bit more about the increase in general and administrative expenses with compensation for travel costs? And if you could give us also a sense of what happened with the nonrecurring expenses there, too? Hi, Hector.
None: Sure.
None: The nonrecurring expenses were just.
Hector: Some professional fees, we incurred from some special projects.
Hector: That won't have an impact going forward. So I mean G&A in general remember, we're investing in it and we're investing in the management team. So it's going to fluctuate quarter on quarter based on sales increases and where we're going and.
Michael L. McCleary: Yeah, basically, overall, we're continuing to review our compensation levels at all levels of management, and so there are some year-on-year increases. And the non-recurring expenses were just some professional fees we incurred from some special projects that won't have an impact going forward. So, I mean, G&A in general. Remember, we're investing in IT and we're investing in the management team. So, you know, it's going to fluctuate quarter-on-quarter based on, you know, sales increases and where we go. And, you know, it can fluctuate up and down a little bit as a percentage of sales. Obviously, our goal in the long run is to leverage G&A as a percentage of sales because One thing I'd add to that, though... and I agree with everything Michael has said. I think the... real fundamental... nature of the club business.
Hector: It can fluctuate up and down a little bit as a percentage of sales obviously our goal in the long run is to is to leverage G&A as a percentage of sales because that helps us deliver better value to our members.
None: One thing I would add to that though.
None: Certainly I agree with everything Michael said.
None: Hey.
None: The real fundamentals.
None: Nature of the club business.
None: It is to continue to find ways to be more efficient in the delivery of merchandise to the ultimate consumer.
None: And Michael you had mentioned I believe that we are.
None: Had recently opened Panama distribution center.
We are soon to open a Guatemala distribution center.
None: Building a distribution center for Trinidad.
None: Those are very strategic decisions.
None: We believe it.
None: The leverage and improve expense ratios and inventory turn.
Robert E. Price: We continue to find ways to be more efficient, and Delivery of Merchandise, C.L.D. Michael had mentioned that... had recently opened a Panama distribution center, are soon to open a Guatemala Distribution Center, and are building a distribution center for Trinidad, all Those are very strategic decisions that we believe can leverage and improve Spence Ratios and Inventory Turn because of the fact that we can flow merchandise in a much more efficient way. We believe, and we've kind of proven it in Costa Rica, where we already have a distribution center. And those distribution centers have many other possibilities beyond just the flow of merchandise to our clubs. As we get more into online shopping and, Members, I think these distributions... The way I think of the distribution center is going back to the early days of Price Club in 1976.
None: Because of the fact that we can flow merchandise in a much more efficient way, we believe and we've kind of proven that in Costa Rica, where we already have a distribution center.
None: Those distribution centers have any other.
None: Possibilities.
Beyond just the flow of merchandise to our clubs as.
As we get more into online shopping and.
Elaine Norwood: Elaine Norwood.
Business to business.
Elaine Norwood: Members.
Thank these distribution centers will become quite strategic the way I think of the distribution center is going back to the early days of price clubs and $19 76 in a sense, we were at distribution centers and.
Elaine Norwood: So in a way, it's going back to our roots and especially as we focus more and more on the.
Robert E. Price: We were a distribution center, and so in a way, it's going back to our roots and, especially as we focus more and more on the business-to-business segment of our bill in our, Excellent. Thank you very much. That was a very, very good caller.
Elaine Norwood: Business to business segment, and our ability and our business.
Elaine Norwood: Our operations.
None: Excellent. Thank you very much that wasn't very good color and then last one too.
Michael L. McCleary: And the last one, too, if you could also share some further details on the performance seen in the other income and expenses, particularly with more color on the spike in other expenses during the quarter. Yeah, I think Hctor, I mentioned in the call that that's pretty much from FX and I called out two things in particular, you know, we have this unique situation where we're sitting on a lot, I think we've talked about this in prior calls, we're sitting on a good amount of cash in U.S., that we convert into U.S. dollars from local currency, we hold that in our bank accounts in Costa Rica and the strengthening of the clone has had an unusual effect of hitting us from a P&L perspective.
None: You did also share some further detail on the performance seen in the other income and expenses, particularly with more color on the spiking in other expenses during the quarter.
None: Yeah, Yeah, I think character I mentioned in the call or that's pretty much from FX and I called out two things in particular, we have this unique situation, where we are sitting on a lot I think we've talked about this in prior calls we're sitting on a.
None: A good amount of cash in U S fluid that we converted in the U S dollars from local currency, we hold that in our bank accounts in Costa Rica, and the strengthening of the <unk>.
None: Unusual effects is.
None: Hitting us from a P&L perspective, so that's essentially unrealized losses on our.
Michael L. McCleary: So that's essentially unrealized losses on our U.S. dollar balances. We're a U.S. dollar-based company overall, and we think from a long-term perspective it's the right thing to do to transfer our, convert our local currency balances into U.S. dollars, and that's what we generally do in all of our markets as long as we are. Sometimes we have some unusual fluctuations from foreign currency in some of the countries.
U S dollar balances, where I guess dollar based company and the homes, we think from a long term perspective.
None: Right thing to do to transfer our.
None: Convert our local currency balances into U S dollars and that's what we generally do in all of our markets as long as we're able to.
None: And we generally hold that because then we can redeploy it easier within the company.
None: So we have some unusual fluctuations from foreign currency, sometimes in some of the countries in the past you may recall, we had similar issues with Jamaica.
Michael L. McCleary: In the past, you may recall, we've had similar issues with Jamaica. So hopefully that's a transitional issue. And then I also mentioned that we continue to pay extra costs to convert the illiquid currencies that we have, such as Andros and Trinidad, www.pricesmart.com, as I understand it.
None: Hopefully that's a transitional issue and then I also mentioned.
None: We continue to pay extra cost to convert the illiquid.
None: Currencies that we have such as an interest in Trinidad into into U S dollars and that's that's also impacting that line.
None: Got it I understand thank you. Thank you very much Robert and Michael for taking my questions. Thank you.
Hctor Manuel Maya Lpez: Thank you. Thank you very much, Robert and Michael, for taking my questions. Thank you. Thank you, Hector. Your next question comes from the line of John Braatz from Oppenheimer.
None: Thank you Hector.
None: Your next question comes from the line of John <unk> from Oppenheimer. Please go ahead.
Jonathan Paul Braatz: Please go ahead. Michael, just a follow-up question: given the currency issues in Honduras, have you implemented any pricing actions in that country similar to what you did in Trinidad? We've taken some pricing actions, but in Honduras, and that's something that we're continuing to review. So yeah, obviously, you know, our goal is to, you know, hopefully be able to avoid any extra costs for incurring in countries where... [inaudible] I want to add one thing too. This is very top of the agenda for Michael and myself.
Michael just a follow up.
John: Given the <unk>.
Currency issues in Honduras have you implemented any pricing actions.
John: That country is similar to what you did in Trinidad.
John: Okay.
John: We've taken some we've taken some pricing actions, but in <unk>.
John: And that's something that we're continuing to review so yeah obviously.
John: Our goal is to is to.
John: Hopefully be able to pay for those.
John: Pay for those.
John: Those extra any extra costs for entering in countries, where we are.
John: Currencies are illiquid.
John: Kind of like the.
John: As I mentioned for Costa Rica was matched on us.
On an accounting basis, but from an economic.
John: Try to line those up.
John: Just add one thing to this is very top of the agenda for Michael and myself suites spent a lot of time talking about Honduras and trying to identify a.
Michael L. McCleary: We've spent a lot of time talking about Honduras and trying to [inaudible] Variety of ways to balance illiquidity, but also making sure that we don't harm the business long-term. Right. Balancing Act and I think we're on top of it, but... Part of the nature of where we do business. We've gotten pretty good at it, but the reality is we go through these periods where it costs us money to reserve a business that's a pretty good business.
John: A variety of ways.
John: Balance the challenge, we have with liquidity, but also making sure that we.
John: Don't harm the business long term.
John: Balancing act.
None: I think were on top of it.
John: But.
John: Yes.
John: Part of the nature of where we do business.
John: Countries that have a lot of challenges.
John: We've gotten pretty good at it.
John: The reality is we go through these periods, where it costs money.
John: <unk> business pretty good business.
Robert E. Price: We're looking at a lot of alternatives for how to deal with it, but it is a significant challenge, and we're on it. Okay, good. And then lastly, Michael, are all the membership increases fully in place as of this time? Or do you have some more to go? Most of them are in place. Substantial majority of them, but not quite all of them. We haven't given any details about countries.
So we were looking at a lot of alternatives for how to deal with the Honduras situation, but it is a significant challenge.
John: Okay.
None: We're on it.
None: Okay. Good and then lastly.
None: Michael our album membership increases.
None: <unk> in place.
None: As of this time or do you have some more to go.
None: Most of them run in place of substantially all of them, but not quite all of them. We haven't given any details about countries or volume most of them are okay. Alright. Thank you.
Michael L. McCleary: All right, thank you. There are no further questions at this time. I'll hand the call back to Michael McCleary. Please go ahead.
Michael L. McCleary: Okay got it.
Michael L. McCleary: Okay.
Michael L. McCleary: There are no further questions at this time I'll hand, the call over back to Michael Mccleary. Please go ahead.
Michael L. McCleary: Okay, thank you, everybody. That wraps up our call today. I hope you all have a great day. Bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Michael L. McCleary: Okay. Thank you everybody that wraps up our call today I hope you all have a great day.
None: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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